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Tuesday, April 1, 2008

Don't get BURNT

Here’s how to avoid a bad property investment by taking note of some do’s and don’ts in real estate investing

Investing in real estate has always been a popular choice by many to hedge against inflation or as an alternative to the more volatile equity market. For the aspiring lot who want to make money this way, the most common goal is to buy cheap and sell high, but like every other investment, there are risks.

Being straddled by high mortgage payments for a home that has little capital appreciation or having to let go of an investment at a price lower than the developer’s initial launch are real life situations. However, one can often avoid getting burnt by a bad property investment by taking note of some common do’s and don’ts in real estate investing.

The things to look into before inking a deal would differ, depending on whether one buys from the primary or secondary market, but the most common factor to consider for both is, of course, the location of the property.

Propertyplus speaks to Raine & Horne International Zaki and Partners Sdn Bhd associate director James Tan who says that those keen on investing in the primary market should not buy units without making a visit to the actual site.

James Tan: Better to have a prime spot

He says that negative factors to be noted are proximity to rivers, graveyards, places of worship, hill slopes, power substations, highways, open spaces, hawker centre and markets, as these places could affect the resale prices.

“Investment properties in secondary locations generally do not fare well. It is better to have a prime spot. For example, shophouses in the front row facing the main road fetch far greater values than a similar unit at the back. The difference in value and rental can be between 20 to 40%,” says Tan.

AIM Realty principal Amy Tey agrees, saying that many buyers today are unwilling to pay more for a unit with an unfavourable location as they know that for the same price they could get a similar unit in a more appealing spot. “Accessibility is also vital.

Amy Tey: Accessibility is also vital

A project with a good concept, design and pricing will not appreciate much if it is a hassle to get in and out of the area,” she says.

More points to consider before sealing a deal:

1) Know the developer:
A lot of Malaysians, according to Tey, still prefer to buy properties from the developer. “The most important thing is to first do some research on the background of the developer to avoid having to deal with problems such as abandoned projects,” she says.

Tan adds that a simple search with the Housebuyers’ Association or the Real Estate Developers’ Association would help identify a fly-by-night company.

2) Land tenure:
Do look into the land tenure before a purchase as some leasehold properties may be sold with terms that are shorter than the 99 years. “Although leasehold condominiums are a popular choice because developers sometimes price them lower than a similar freehold condo, many purchasers still prefer to own a freehold home as it gives them peace of mind and security knowing it is truly theirs,” says Tey.

3) Project density:
Tan says it is good to note the number of units in a scheme, as it is a factor in determining the potential for capital appreciation. “A project with less than 100 units has better opportunity for appreciation compared with a project with 1,000 units. The higher the density, the lower its potential for capital appreciation,” he adds.

4) Property check:
When searching for a potential real estate to buy, it is good to look beyond the exterior. Tan feels that no one should buy a property without first doing a thorough check of the whole house and keeping a lookout for things such as roof leakage, termite attack, flooding and so on.

5) Keep a cool head:
Real estate agents are good at selling their products and that is why they do it for a living. It is easy to get carried away with the marketing talk, but regardless of how sincere an agent appears, always seek advice from lawyers or consultants before signing a contract.

6) Economic environment:
Investing in real estate requires some basic knowledge of the property cycle. Some are able to predict the boom time and make money for their investment, while others are unable to gather income from a rental property purchased at the peak of the cycle. Tey cited an example: “A client purchased office suites near the Taman Jaya LRT station in the early 1990s for a high price when the market was good, but when the recession hit, he was stuck with low rental rates and was unable to sell the unit for a good price as the secondary prices were nowhere near the developer’s price.”

These are but some of the guidelines for property investment hunting but there are many other things to take note of, says Tan. One is to check on the transferability of the property title; whether the property can be sold while it is under construction. The other, he warns, is to avoid buying property which does not have the necessary approvals from the authorities. “Buyers should not buy a property that do not have the approval of the authorities as they can tear down illegal extensions and alterations,” says Tan. At the end of the day, it takes a little bit of luck as well to find your perfect home or investment property.

By theSun - Propertyplus - (by Allison Lee)

Scientex sees RM1.3b GDV in Johor projects

KULAI: Scientex Inc Bhd expects to generate RM1.3bil in gross development value from its two ongoing property projects in Johor.

Group managing director Lim Peng Jin said RM800mil would come from its Pasir Gudang project and RM500mil from its Kulai project.

Lim Peng Jin

“The two projects will keep us busy for the next eight years,” Lim told StarBiz at the recent launch of Scientex Kulai's sales office and show village.

Lim said Scientex's flagship project in Pasir Gudang, launched in 1996, had generated RM1.5bil from sales of 5,360 residential and commercial property units.

He said 40% of the 404.68ha Taman Scientex Pasir Gudang had been developed and in the pipeline were 6,700 units of mixed properties.

Lim said its latest project, Scientex Kulai, on 101.17ha would have about 4,000 residential and commercial properties upon completion in eight years. He said the Kulai project was located about 9km from Kulai town and easily accessible from the North-South Expressway.

“Our two projects are within the Iskandar Development Project with Pasir Gudang in the East Development Gate and Kulai as the Secondary Urban Promotion Area,” Lim said.

By The Star - StarBiz - (by Zazali Musa)

YNH appoints architects for building

PENANG: YNH Property Bhd has appointed Foster & Partners as architects for the group’s RM1.8bil Menara YNH in Kuala Lumpur's Golden Triangle.

“We made the appointment because our buyers for the project have indicated that they wanted an internationally-renowned architect for the building.

“The rationale is to add value to the project,” group corporate services head Daniel Chan told StarBiz.

Britain-based Foster & Partners, appointed last week, has high-profile projects in Germany, South Korea, Hong Kong, France and Malaysia.

The company designed the London headquarters of global insurance company Swiss-Re, Hongkong and Shanghai Bank's head office in Hong Kong, Hong Kong International Airport - touted as the world’s largest airport - and London’s third airport, Stansted.

It is currently designing Daewoo Electronics' headquarters in South Korea, and Vivaldi Tower in Amsterdam, the Netherlands.

Sir Norman Foster, the 1999 Laureate of the Pritzker Architecture Prize, is chairman of Foster & Partners.

Chan said the iconic Menara YNH would have a luxurious retail podium equipped with energy-saving features. The 45-storey building will have more than 55,000 sq ft of built-up area per floor, and a total of 1.2 million sq ft of lettable space.

Early this year, the group announced an offer from Kuwait Finance House to buy 50% of Menara YNH for RM920mil.

Investors from Australia and Singapore are currently considering acquiring the remaining 50% of the project.

On the group’s project in Mont Kiara, Chan said YNH Property would launch the RM680mil D’Kiara Place, at the end of the second quarter.

The project, comprising serviced apartments, an office block and a retail centre, is located near Plaza Mont Kiara, a landmark business and commercial complex.

In a recent report, ECM Libra Investment Bank said YNH Property has one of the highest unbilled sales in the country.

It said with half of Menara YNH for RM920mil, YNH's unbilled sales of RM1.2bil was one of the largest in the country, more than four times its 2007 revenue of RM290mil.

This means that the group has locked in 40% to 50% of its earnings before interest and tax for financial years 2008 and 2009.

By The Star (by David Tan)

KUB to sell building for RM86.5mil

PETALING JAYA: KUB Malaysia Bhd is selling its building in Kuala Lumpur to Park Residence Development Sdn Bhd for RM86.5mil as it seeks to unlock the value of the asset and also use the proceeds to repay its borrowings.

KUB said yesterday its unit KUB Realty (PJ) Sdn Bhd had signed the sale purchase agreement with Park Residence to dispose of the office tower at Megan Phileo Avenue, which includes shoplots and car parking bays.

It said the property had 20 shoplots/offices with total lettable space of 198,000 sq ft. KUB and tenants occupy the tower and the total rental income is about RM6.17mil annually.

“The property is currently charged to CIMB Bank Bhd, the vendor’s financier as security for a loan granted to the vendor,” it said.

KUB said an independent professional valuer, Messrs CH Williams Talhar & Wong, had assessed the market value of the building at RM85mil in May 2006 based on comparison method.

KUB Realty acquired the property on Dec 17, 1999 at RM62.37mil. The net book value of the property, including renovation, as at Dec 31, 2006 was RM70.72mil.

It said based on the audited consolidated financial statement as at Dec 31, 2006, the proposed disposal was expected to improve the KUB group’s net assets per share by about two sen.

KUB is involved in information and communications technology, the energy sector and also the fast-food business.

By The Star